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[music] >> Hello, I'm Anthony Okolie in for Greg Bonnell, and welcome to Moneytalk live, which is brough to you by TD Direct Investing.
Every day, we'll be joined by guests from across TD, many of whom you'll only see here.
We'll take you through what's moving the markets and answer your questions about investing.
coming up on today show, we will discuss what to keep in mind when it comes to personal finance, if you have a child entering University in September with Nicole Ewing, Dir. tax and estate planning with TD Wealth. And in today's WebBroker education segment, Nugwa Haruna will show us how you can examine your portfolio's assets, asset mix, using the platform.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get our guest of the day, let's get you an update on the markets. We will start here in Canada where the markets opened in negative territory.
The S&P TSX composite index is down a modest 62 points or about .3%. Of course weighing on the index and early trading were mining stocks, which is offsetting some modest gains in the energy sector.
Taking a look at some of the big movers, shares of Barrick Gold are trading down to the tune of 1.5%.
shares of Barrick Gold are under pressure.
Yesterday, it was reported that Barrick Gold was targeted by Russian cyber criminal group Clop in a massive global data theft incident that is affected hundreds of corporations and close to 20 million individuals. They are down about 1.5% right now. Take a look at the S&P 500. There were reports late Wednesday it from Netflix and Tesla that cooled the markets momentum. It's down about .2%.
taking a look at the tech heavy NASDAQ composite index, it is trading in negative territory. It's down about hundred and 50 points. We'll call that just over 1%.
Taking a look at AMD, advanced micro devices, it's and all 3%. The chipmakers are getting ready to report results soonbut when it comes to the all important Outlook, some industry watchers think that AMD may suffer from elevated expectations.
Looking at some other big movers, shares of Johnson & Johnson are moving higher this morning.
Of course, the pharmaceutical giant posted revenue and profits that topped analyst expectations. The company also hiked its full-year outlook. Currently, the stock is up to the tune of about 5 3/4 of a percent.
And that is your market update.
For parents who have children starting at college or university in September, there can be plenty to consider from a personal finance perspective.
Here to discuss is Nicole Ewing, Dir. of tax and estate planning at TD Wealth.
Nicole, thanks for joining us today.
>> It's my pleasure. Dr. Cole, if you child enrolled in college or university, we know about RESPs, but could you remind us about what we should know?
>> So, we are thinking then, presumably all of our contributions have been made and now we have to start thinking about withdrawing that. And we want to do that as effectively as possible to get the biggest bang for the buck. Just to level set, there are two types of payments that can be withdrawn from your RESP. You have the contributions that you have put in yourself, and then you have the investment growth and the grants that have been paid on that.
the treatment for the tax treatment is different depending on how you are designating that withdrawal.
if it's a contribution, that will come out tax free, it's a contribution.
The investment growth and the grants are going to be, there are certain limits around that.
These are educational assistance payments and they are limited in the first 13 weeks of the school year, at a qualified educational institution and we have to make sure that we are following all of that criteria, but we want to really think about how we are going to pull that money out and with the income of the individual student is going to be at that time.
>> gift be very thoughtful about how we will O.
>> Yes,the ideal is to get it out tax free or with the minimal amount of tax possible. The government has, for the first time in 25 years I believe, up to the amount that you can take out in that first 13 weeks. The reason there is a limit on all is that they don't want people signing up and then taking all their money and immediately withdrawing from school, so they put that 13 week limit on there because it's usually how long you can't drop it without being on the hook for the money.
So that has increased from $5000-$8000 for full-time students and 4004 part-time students.
We want to get those educational pigments out as quickly as possible.
They are going to be taxed in the hands of the student and presumably they are going to be in a lower tax rate than they otherwise would have been or you would have been.
And with the $15,000 amount that they are able to earn tax free, we shouldn't have too many taxes on that.
We want to think about one that we are pulling it out and trying to get those educational payments out as quickly as possible, of course without draining the funds that we are going to need for future years. But be mindful that that's, we get those out without… More quickly. More quickly.
>> Okay. So other than withdrawing from your RESP, what else should we be thinking about?
>> Well, for many students, this is their first time being away from home, or even if they are still at home, but being faced with a whole bunch of choices that they might not have had before. If we can have people really understanding early the impact of debt, that would be, if there was one thing I could tell students going to school is be wary of people who are standing out front offering you to sign up for a credit card without really thinking through with that is, what your repayment schedule would be for those sorts of funds. So debt, be really careful about that.
Also we are now turning 18 and start thinking about TFSA contributions, so if there's any part-time jobs and we have access money, we want to be mindful about how we are using that and earning money on that. So the financial literacy part is going to be really important for students to be aware of.
A great way of doing that is having a budget and thinking through what expenses you are likely going to have and if you are a parent, helping your child understand… > How to manage your money in University.
>> Also with the credit card, I was one of those people.
>> Same here.
>> I signed up for it and I thought that would be great.
and the other thing, if you are as students on a scholarship or bursary related to your academic performance, help your student understand that losing that has a cost.
If that's because you want to have a part-time job that won't advance your career in any way, you potentially giving up the grades that will maintain your scholarship for some spending money.
Unfortunately, I saw a lot of the students I went to school with who came in with these tremendous scholarships, they were not able to maintain them because they were doing these other extracurricular type activities. The dispute really mindful of the dollar amount and how if you lose that scholarship, what's going to take to get you back in line?
>> I want to talk a little bit about housing.
There is a shortage of housing given the influx of new immigrants and international students. What a parent be aware when it comes to student housing?
>> There are a lot of different options.
Students might be coming from other jurisdictions and they are here for the first time. So I would say getting familiar with what the landlord and tenant laws are in the province that you are in because they are quite different.
So being aware of, when you are signing the lease, what you are signing up for and the financial obligations that come with it.
So if we are having roommates, for example, what does our lease say, are we on the hook for the entire amount or are we only responsible for our share? Many parents, of course, purchase homes or condominiums, if they have multiple children, it sometimes makes sense to do that, so purchase a condominium or home that your child can stay in and rent out the other rooms.
Yet be very cautious about understanding with the obligations are.
if you got Hydro bills, telephone… Probably not land lines, I'm dating myself.
We want the students to understand that these are contracts withfinancial costs.
Depending on the type of home you get, there may be those additional costs.
Is it inclusive? Is parking included? Is there transit nearby they can help you cut downon some of the other costs that you might otherwise be incurring? So there's a lot of other factors that go in, depending on what type of housing unit your student finds themselves in.
>> A great start to the discussion and we will get your questions about personal finance for Nicole Ewing in just a moment.
And a reminder that you can get had with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Now here's an update on the top stories in the business world today and a look at how the markets are trading.
Netflix said it added nearly 6 million new streaming customers in the second quarter, nearly triple what Wall Street's estimates were. The streaming giant NOW boasts more than 230 million global customers, subscribers rather.
Profits for the quarter also topped forecasts, but quarterly revenue of $8.2 billion fell just shy of analyst predictions.
A weaker than expected outlook for revenue in the third quarter pressured shares lower in early trading. Meanwhile,tesla posted better-than-expectedsecond quarter earnings late Wednesday, while revenues rose to a record $24.9 billion. Tesla said adjusted earnings for the quarter were up 19.7% from the same period last year and topped Street forecasts.
However, adjusted automotive margins were down from last year following a series of price cuts and its biggest global markets.
And finally, Apple became the latest company to jump aboard the artificial intelligence trend.
The iPhone maker has begun preparing an AI chatbots to rival open AI's ChatGPT, Microsoft Bing and Google's bard.
According to reports, Apple built the AI chatbots service on proprietary models created by a framework called Ajax, which was first built last year and runs on Google cloud.
The move signals apple is taking recent advances in AI technology seriously and is considering integrating them into future products. And here's how the main benchmark index in Canada is trading.
currently, the TSX is still down modestly, nearly 57 points, to the tune of .3%.
Taking a look at the US S&P 500, it's also down modestly, just above nine points or 0.2%.
We are back with Nicole Ewing, taking your questions about personal finance.
We will start with the first one.
This one is on medical Corp.
shares. A former medical professional Corporation converted to a consulting Ontario Corporation on retirement has voting share, Dr., and nonvoting shares, spouse.
Can the nonvoting shares be paid a dividend or converted to preferred shares with rights to dividends?
Nicole, I hope you got all that because I didn't.
>> I have encountered this question before it. It's a very common question for medical professionals because medical professionals have restrictions when it comes to their Corporation.
Who can own shares and what type of shares they can hold. But once they are no longer practising medicine, it's no longer medical professional Corporation.
So it can be essentially a holding company or another type of company that you are operating through.
What matters is that when you created the company, you would've created different types of shares. You created chairs for yourself and for your spouse in this instance.
Those shares, we want to go back to the articles of incorporation and want to look at what those share attributes are, what they say. Are there dividend rights to them?
What those might be. And because they're all those restrictions when the company was first set up as a medical corporation, the share attributes might not have the options that you want them to have going forward.
So what we might be doing in an instance like this, if you are shares don't allow for the payment of dividends in this situation, we might need to perhaps issue new shares or convert our shares, trade them for a new kind with the share attributes that we want to have attached to it.
what we need to be very cautious about is transferring valuefor nothing. That is where the government and CRA is going to be very upset if we create this new class of shares and all of a sudden we are funneling out money on those shares that really should be properly owned by these ones over here. So just being cautious about what those attributes say so that we are not transferring value from doctor to spouse without being mindful of the tax consequences of that or doing appropriate steps to get that over tax-free.
So this is my very long way of saying you can have shares within your corporation that's continuing as an Ontario Corporation and we might have to issue new shares.
>> Thank you for clarifying that for me as well. You will move onto the next question on cottages.
Any general guidelinesfor cottage transfer planning?
>> I mean, we could talk for days.
Some families talk for years about these issues because transferring the family cottages a very emotional issue but it also comes with some very serious tax consequences depending on how things are set up.
So I would say that the beginning of this discussion, you want to, firstly, be mindful of what your cost base is, what did you pay for the cottage?
What additional costs can you add to that?
For example, if there have been construction at the property.
>> Would that include renovation?
>> Certain kinds.
There's a difference between if we are making a substantial change or just maintenanceand how the government treats that sort of thing differently.
So we want to have our cost base understood, with that is, and our fair market value to know what the tax consequences might be. And then I would say, first step is talking to your family and finding out if they even want the cottage. And I've spoken with more than one client where the parents are really struggling about how to transfer this on, they have three children and they want to be equal and fair and how do we do this, and we say, have you spoken to them?
Do they want to? It that can sometimes lead to different results.
So making sure that the people who want to take over the cottage understand what they are… What their options are and what the obligations will be going forward, and that they might be giving up some of the liquid estate that they would have otherwise been transferring.
Stop me if I go too far, but you want to really think about, are we transferring it during life? And if so, there's probably going to be a tax consequence for that, whether we transferred into a trust or we can lay out some of the terms.
Do you freeze the property and walk in the value entrance for the future growth to other family members?
Or we can think about leaving it in our will and all of the issues that come with that and how precise we need to be.
One of the other big, big issues is the tax bill.
And planning around have a tax bill is going to be paid so that we are not in a situation where we need to sell the cottage in order to pay the tax on the cottage. So we want to think about the different types of ways of funding that tax bill and there is insurance for that or self funding, different ways to think about how your way to achieve that and whether that next generation might be perhaps finding some of that as well.
It's a big, big conversation. The most important part is open communication about what it is you are trying to achieve, why do you want this cottage to be passed down, is it your wish or the wish of the individuals? And then try to do that in the most cost-effective way, tax effectively and family harmony maintaining way as possible.
>> As you said, lots to consider when it comes to transferring the cottage.
>> Very much.
>> We will move to the next viewer question. This is on old age security. I just listen to your show on buying or renting and she said that earning money in stocks would impact my old age security.
Really? Is that true? Or has she made a mistake?
The viewer is referencing an episode of MoneyTalk from June of this year that you were on, so I will pass it on to you.
>> Great. I always appreciate the opportunity to clarify and make sure that we understand what it is I'm talking about.
So yes, it can impact your OAS, depending on the type of income and investment you have.
so firstly, when we look at our old age security threshold, the government threshold at which any amount over that will have a clawback on your old age security, and the value that is being used to determine what your income is includes the gross dividend value that you included in your taxes. So just to back up a little bit, when we earn dividends, say I earn hundred dollars.
I received my hundred dollars. My report that all my taxes, I need to gross up that amount, and that's all part of theintegration of the tax system and to make sure that corporate pay taxes and individual paid taxes have come together for perfect integration so there is no impact to the type of business that you might be wanting to operate under.
Anyways!
That $100 is actually when you show up as $138 on my tax return.
And so if I'm thinking that I take X number of dollars out as dividends, and that's going to be at my income, 87,000 are just under his threshold now, so I put that down, 87,000 of dividend, for example, that is not the value that is going to be used for OAS purposes.
For old age security, they are going to do the 87,000×.38 or 1.38 in order to get that up and we are going to be then in a situation where we have a clawback of the old age security that we have received.
What do we do about it? Well, there are different types of investments. Of course, capital gains… As long as they are just accruing, there is going to be any income.
We can have our dividend producing stocks in our TFSA, so when we withdraw from our TFSA, that's not going to impact, it's not included in income for the purpose of old age security so there some strategies there, but yes, be mindful of your dividend paying investments in terms of your old age security and the threshold for the income that's in question.
> Great start to the discussion.
As always, make sure you do your own research before making any investment decisions.
and we will get back to your questions for Nicole Ewing on personal finance in just a moment.
And a reminder that you can get touched us at any time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now let's get to today's educational segment.
If you are looking to find out what sort of asset mix you have in your portfolio, WebBroker has tools which can help.
Joining us now with more is Nugwa Haruna, Senior client education instructor with TD Direct Investing.
Sonuga, for investors looking to determine what the breakdown of assets that they hold in the portfolio, is there a tool in WebBroker that can help?
> Yes.
There is a tool within WebBroker called the asset allocation tool that investors can use. The reason why investors may consider holding different asset classes, and when we say asset classes, we mean equities, fixed income, cash or cash equivalents or even things like real estate or options, and the reasons why investors may consider having an asset mix and their portfolio can be for diversification reasons.
That's because these asset classes tend to react to market conditions in different ways.
So for an investor who is looking to manage risk, they may consider holding a combination of these different asset classes. Let's happen to WebBroker and take a look at how investors can see what they are holding.
So once in WebBroker, you want to go under accounts and once under account details, you are going to click on asset allocation. Now, the account I am using is a demo account.
There are no assets in there. But as an investor, you would be able to see what the breakdown would be in your portfolio.
So you would see things like equities, Canadian, US, international equities.
You will also see things like fixing, as well as cash and cash and cash equivalents and other.
so for investors who want to explore more about what this looks like, I would encourage you to click on the little?
That's just on the right side of your screen. Once you do that, you will be presented with what an asset allocation would look like.
I will also break it down and give you a definition of each of these asset classes so you are more comfortable with what you're putting in your portfolio. So this is a way investors can do some sort of portfolio management and see exactly what they are holding in their accounts.
>> That's great perspective.
So if I'm interested in seeing the historical returns of a portfolio with a similar asset mix and how it has performed in the last few years?
>> Rate. So some investors may, after going through this, may realize maybe I am holding 70% stocks versus 30% fixed income. I never took the time to break that down to see what my potential returns could be.
Even though there is no tools or project, effectively project what your returns would be, there is a way you can see what people holding similar portfolios, how that would've performed in the last 15 years.
So you can see historical returns. Let's happen to WebBroker and I will show you where you can find this information.
In WebBroker, what you want to do is go to the goals tool.
Once you click on gold, you want to go ahead and start creating a goal.
The second step when you are creating a goal is being presented with the different asset mixes. I've started creating a goal and when I click continue, I'm on step two.
so at this step, you will see some of the most popular investor portfolios.
So conservative is more 7030, 70% fixed income and cash and 30% stocks.
Moderate is more 6040, 60% equities, 40% fixed income. But if you want to look at what your own portfolio, how it has… How it would've performed the last 15 years, once again, historical performance is not a projection of the future, you can actually create your own profile.
Some went click on create your profile here and this is where you get the opportunity to throw in what your asset makes it is. I'm just going to pull a few numbers.
I will say 30% Canadian equities, 30% US, I will make international equities 10% and let's say 10% here as well for our Canadian and 10% for global fixed income.
So after doing this,I will click on update historical returns. So once I do that, I would be able to see a portfolio that held 70% equities and 30% fixed income, in the last 15 years, the best year was, that portfolio would have been up almost 30% but also because you are dealing with equities which can be very volatile, the worst year would've been out 20%, and then the average return of this portfolio would've been around 6.
5%.
So this investor can make an informed decision. Maybe they want to reduce the equities position, let's make this tan, links make this 10, BBM going to increase my fixed income positions, make this 30.
After doing that, let's update this portfolio and once you do that, you will see that now this portfolio that is more heavily weighted in fixed income, you can see in the last 15 years that the best year was up around 12.5%, the worst year was down 7.5%.
Life reduce that volatility in my portfolio but it also means that because I'm taking less risk, I'm also potentially reducing my average return. These are things that investors can do within the portfolio to give them an idea of historical performanceof a portfolio similar to theirs and potentially let them know what they may be looking at if they keep holding this portfolio for the future.
>> Nugwa, great information as always.
Thank you.
>> It's always a pleasure being here.
> Our thanks to Nugwa Haruna, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Now before you get back to your questions about personal finance for Nicole Ewing, a reminder of how you can get in touch with us.
>> Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker.
Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
>> Okay, we are back Nicole Ewing, taking your questions about personal finance.
This is on tax changes. Have there been any changes in tax law that I should be aware of?
>> Well.
Really… For the last 10 years or so, we have seen really significant changes in the tax rules in the planning that we need to do around that.
And most recently, we were, again, there were some proposed changes that will be coming through or may be coming through next year. I think the one, it's not really a change but it might just remind people that there was a recent court decision in terms of the information sharing between the CRA and the IRS. And Canadian organizations with the US government. And we have these rules for account forms that need to be completed and information shared and a couple of taxpayers brought to the court and said this is unconstitutional. You are sharing my information. That shouldn't be done.
Unfortunately, unfortunate for them, the court said, no.
We are going to continue sharing it. And they appealed and they appealed and the final result is, no, we are going to continue sharing it. So for taxpayers that have those US connections, you need to be doing that filing. We are sharing that information. Canada and the US to do share banking information.
This is why you need to fill out those forms. Every time you open an account, you are asked to rate your citizenship. That account sharing information will continue.
So from a tax perspective,it's interesting. There was a case many years ago, it's not new, but in terms of whether you can collect a debt, with the IRS can have Canada pay any refund owing to the individual over to them. And in that case, yes, the IRS could ask to do that.
A lot of changes. I would say hold tight, there is still some legislation being looked at, potentially redrafted. But certainly depending on what type of taxpayer you are and if you're a business owner, we've seen a ton of changes in the last few years and I expect we will see more.
>> Okay.
We are going to switch here's a little bit. We will talk about donations. Next question. I've read that there have been changes to the way charitable donations are taxed.
What's going on?
>> Well, this is one of those proposed changes that was in the budget and there is frankly been a lot of… The way that it is being communicated to the public is being misunderstood by some individuals in terms of how it's going to have an impact on them individually.
just sort of broadly speaking, the changes, I think this question is speaking to is changes to the alternative minimum tax calculation.
So you may have heard about this. This was the big one, the sleeper when the budget came out and then everybody started understanding what the impact is. When an individual earns tax preferred income, so think capital gains, and has with the government calls excessive use of credits or deductions to reduce the amount of tax owing, there is a separate population done called alternative minimum tax.
If that threshold is met, you will have to pay tax, the difference between what you otherwise would have actually owed and the resulting alternative minimum tax amount.
It is relatively low, 15% that tax would be to any amount over $40,000. That's the exemption amount. The change in that has increased that exemption amount to I think $73,000. and the calculation of what's included, that's was changed and that probably was going to impact charities in the situation.
so when we do that calculation, that base of what is included for alternative minimum tax, previously, you would have 80%of capital gains included, now is going to be 100% included.
And donation of publicly listed securities, which were not included at all before, are now being included at 30%.
And the tax credit, the AMT tax credit the you are able to use to reduce that AMT amount has also been reduced from 100% to 15% of certain of these deductions and credits.
So the calculation has changed and for very, very high income earners who have very significant reductions in their tax owing by the use of things like the lifetime capital gains exemption or charitable donation or these other sort of credits that can reduce it, that's something that they are going to be mindful of.
And there is a concern that some of these charities might not be receiving the donations that they otherwise would have because people are not getting the tax preferred outcome that they would've had previously. And so depending on who you are and what your income level is in the amount of gifts that you're making, it could impact you.
I will say that for contexts sake, the examples I see being used are an individual earns $2 million of capital gains in a year and makes the million dollar donation.
So that should give you a hint to the numbers we are talking about for the types of situations where these changes to the AMT might be impacting individuals in the sorts of situations. But generally speaking, when you're talking about charitable donations that most of us would be making… > Slightly lower then.
>> It certainly not at that threshold.
And so for most people, I would say this is not going to impact you directly. There is a lot of fear being generated around these issues and they are real. They are real.
We need to be aware of how alternative minimum tax calculations can really have the intended consequences, perhaps unintended consequences. Charities are rightfully concerned about the impact to them.
But for individuals making charitable donations, unless it's in that very significant range, you probably don't have much to worry about.
>> So I wouldn't have anything to worry about there.
We will move to the next question from our viewers. This is on portfolio moves.
If I'm making changes to my portfolio, what should I be keeping in mind from a personal finance perspective?
>> I like that question.
It's a great question because it puts the investment decisions that we are making, our portfolio decision, in the context of the big picture, the overall plan, hopefully, that we have for our assets.
So it always suggests, you are stepping back, looking at your overall goals, what is it you are trying to achieve, what assets you have, liabilities.
We pull that together to plan so you will have clarity on the environment you are operating within. When it comes to making those individual changes to your portfolio, there might be tax consequences to that.
And it does surprise me but it surprises taxpayers that they're going to be at tax consequences on the trades that are being made or the type of income that is being earned. So if you're moving, for example, from… Capital gain to a dividend paying stock, this is where you might have the impact on things like your old age security that you weren't anticipating.
See want to, again, step back and look at it from the big picture.
Whenever we are making changes, again, we want to be mindful of superficial loss rules. These of the rules of essentially say it if you are claiming a loss and have sold or reacquired within a certain period of time, 30 days before or after, think about the 60 day window, your loss is going to be denied. What many people don't think about in that situation is that it also applies to your spouse.
So if your spouse is buying or trading in their portfolio and you are over here doing similar things but not communicating with each other, you could inadvertently fall into the superficial loss rules which would deny any of your losses that you might be trying to harvest and get into more higher-paying, higher value stocks.
So you definitely want to be thinking about that in the full picture and then to the extent that you are making any of these changes and these are registered plans that allow you to have beneficiary designations, make sure that those are up to date and that you are being mindful of those as well.
Gosh, yeah, I really suggest making sure that you are looking at it holistically and that the individual investment decisions that you make, which I will leave to you to me, but they can have these other impact on your planning.
>> Okay.
We will get back to your questions for Nicole Ewing on personal finance in just a moment.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get in touch with us anytime.
>> Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
>> Time now for the update on the markets and we are having a look at TD's advanced dashboard, a platform designed for active traders available through TD Direct Investing. We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by price and volume. You can see that in the top right corner, there is weakness in Shopify which is down more than 3%.
Taking a look at some other names,ABX, Barrick Gold is also down a little over 1%.
Okay, let's take a look at the S&P 100.
And right in the middle, Tesla you can see is in the red, down more than 7%. Tesla just reported some mixed results on Wednesday.
We saw a drop in its operating margin, so it is down to the tune of just about 7%.
Also Netflix on the left-hand side is down as well, it reported some mixed results on Wednesday.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now Nicole Ewing from TD Wealth with the next question.
This is on estate freezing.
Can you please explain estate freezing?
Good question.
> Yes, I can ask Mark This is a term that is thrown around a lot for business owners or those of us that has significant assets that are expected to grow so you might be hearing this terminology.
So simply what you're doing and the reason it is called estate is because we are thinking about your final tax bill. We are freezing your estate at the value that it is at today.
so if we use, for example, say I have a business that is currently valued at $5 million and there is a very clear likelihood that is going to be going up in value in the next 20 years, but I don't need any more than $5 million. That's all I need and I have enough assets to last me for the rest my life so I don't need to be tapping into that. So to the extent that we have assets continuing… I'm continuing to hold them, continuing to gain value, that ultimately is going to be taxed on my death.
So what I say is, hold on, I'm going to freeze the value of my company today at that $5 million by taking preferred shares that are fixed at and valued at, redeemable at $5 million, meaning they can never go up.
You can't have dividend rights on it.
Don't fret.
The common shares, those that are going to gain value in the future, are going to be transferred either to another individual or, more typically, to a trust that that, in the future, upon my death, when I am deemed to have disposed of all of my assets, what I have disposed of is $5 million of preferred shares. Even if my company is worth $20 million, that 15 million is not going to be taxed in my hands or my estate, it's all going to be taxed in my children or beneficiaries hands unless or until they transfer that property.
The one thing to be mindful of in an estate freeze that is sometimes overlooked is that if you are using a trust to do that, because maybe you don't know who you want to give those shares to, be mindful that we have a 21 year rule. That every 21 years, the trust will be taxed on the value of any growth during that time.
So just be mindful, depending on age, sometimes these freezes are done too early and then you are in the position of, do we pay this tax that I wouldn't have had to payif I had kept the whole value in my hand? Or am I rolling those assets out of the trust and into the hands of beneficiaries may be before I intended to?
So essentially, yeah. That's what you're doing.
We are freezing the value of the asset at today's value and that the current owners value will never increase and that future value has been transferred to somebody else.
>> Great discussion. Thanks very much for joining us, Nicole.
>> My pleasure.
>> How are things to Nicole Ewing, Dir. of tax and estate planning at TD Wealth.
Make sure to always do your own research before making any investment or personal finance decisions. Will be back tomorrow with a look at the latest Canadian retail sales report and an update on how the markets are faringheading into the weekend. Be sure to tune in on Monday.
Damian Fernandes, portfolio manager at TD Asset Management will be our guest taking your questions about global stocks.
A reminder that you can get a head start.
Just email moneytalklive@td.
com.
That's all for our show today. Take care.
[music]
Every day, we'll be joined by guests from across TD, many of whom you'll only see here.
We'll take you through what's moving the markets and answer your questions about investing.
coming up on today show, we will discuss what to keep in mind when it comes to personal finance, if you have a child entering University in September with Nicole Ewing, Dir. tax and estate planning with TD Wealth. And in today's WebBroker education segment, Nugwa Haruna will show us how you can examine your portfolio's assets, asset mix, using the platform.
Here's how you can get in touch with us.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Before we get our guest of the day, let's get you an update on the markets. We will start here in Canada where the markets opened in negative territory.
The S&P TSX composite index is down a modest 62 points or about .3%. Of course weighing on the index and early trading were mining stocks, which is offsetting some modest gains in the energy sector.
Taking a look at some of the big movers, shares of Barrick Gold are trading down to the tune of 1.5%.
shares of Barrick Gold are under pressure.
Yesterday, it was reported that Barrick Gold was targeted by Russian cyber criminal group Clop in a massive global data theft incident that is affected hundreds of corporations and close to 20 million individuals. They are down about 1.5% right now. Take a look at the S&P 500. There were reports late Wednesday it from Netflix and Tesla that cooled the markets momentum. It's down about .2%.
taking a look at the tech heavy NASDAQ composite index, it is trading in negative territory. It's down about hundred and 50 points. We'll call that just over 1%.
Taking a look at AMD, advanced micro devices, it's and all 3%. The chipmakers are getting ready to report results soonbut when it comes to the all important Outlook, some industry watchers think that AMD may suffer from elevated expectations.
Looking at some other big movers, shares of Johnson & Johnson are moving higher this morning.
Of course, the pharmaceutical giant posted revenue and profits that topped analyst expectations. The company also hiked its full-year outlook. Currently, the stock is up to the tune of about 5 3/4 of a percent.
And that is your market update.
For parents who have children starting at college or university in September, there can be plenty to consider from a personal finance perspective.
Here to discuss is Nicole Ewing, Dir. of tax and estate planning at TD Wealth.
Nicole, thanks for joining us today.
>> It's my pleasure. Dr. Cole, if you child enrolled in college or university, we know about RESPs, but could you remind us about what we should know?
>> So, we are thinking then, presumably all of our contributions have been made and now we have to start thinking about withdrawing that. And we want to do that as effectively as possible to get the biggest bang for the buck. Just to level set, there are two types of payments that can be withdrawn from your RESP. You have the contributions that you have put in yourself, and then you have the investment growth and the grants that have been paid on that.
the treatment for the tax treatment is different depending on how you are designating that withdrawal.
if it's a contribution, that will come out tax free, it's a contribution.
The investment growth and the grants are going to be, there are certain limits around that.
These are educational assistance payments and they are limited in the first 13 weeks of the school year, at a qualified educational institution and we have to make sure that we are following all of that criteria, but we want to really think about how we are going to pull that money out and with the income of the individual student is going to be at that time.
>> gift be very thoughtful about how we will O.
>> Yes,the ideal is to get it out tax free or with the minimal amount of tax possible. The government has, for the first time in 25 years I believe, up to the amount that you can take out in that first 13 weeks. The reason there is a limit on all is that they don't want people signing up and then taking all their money and immediately withdrawing from school, so they put that 13 week limit on there because it's usually how long you can't drop it without being on the hook for the money.
So that has increased from $5000-$8000 for full-time students and 4004 part-time students.
We want to get those educational pigments out as quickly as possible.
They are going to be taxed in the hands of the student and presumably they are going to be in a lower tax rate than they otherwise would have been or you would have been.
And with the $15,000 amount that they are able to earn tax free, we shouldn't have too many taxes on that.
We want to think about one that we are pulling it out and trying to get those educational payments out as quickly as possible, of course without draining the funds that we are going to need for future years. But be mindful that that's, we get those out without… More quickly. More quickly.
>> Okay. So other than withdrawing from your RESP, what else should we be thinking about?
>> Well, for many students, this is their first time being away from home, or even if they are still at home, but being faced with a whole bunch of choices that they might not have had before. If we can have people really understanding early the impact of debt, that would be, if there was one thing I could tell students going to school is be wary of people who are standing out front offering you to sign up for a credit card without really thinking through with that is, what your repayment schedule would be for those sorts of funds. So debt, be really careful about that.
Also we are now turning 18 and start thinking about TFSA contributions, so if there's any part-time jobs and we have access money, we want to be mindful about how we are using that and earning money on that. So the financial literacy part is going to be really important for students to be aware of.
A great way of doing that is having a budget and thinking through what expenses you are likely going to have and if you are a parent, helping your child understand… > How to manage your money in University.
>> Also with the credit card, I was one of those people.
>> Same here.
>> I signed up for it and I thought that would be great.
and the other thing, if you are as students on a scholarship or bursary related to your academic performance, help your student understand that losing that has a cost.
If that's because you want to have a part-time job that won't advance your career in any way, you potentially giving up the grades that will maintain your scholarship for some spending money.
Unfortunately, I saw a lot of the students I went to school with who came in with these tremendous scholarships, they were not able to maintain them because they were doing these other extracurricular type activities. The dispute really mindful of the dollar amount and how if you lose that scholarship, what's going to take to get you back in line?
>> I want to talk a little bit about housing.
There is a shortage of housing given the influx of new immigrants and international students. What a parent be aware when it comes to student housing?
>> There are a lot of different options.
Students might be coming from other jurisdictions and they are here for the first time. So I would say getting familiar with what the landlord and tenant laws are in the province that you are in because they are quite different.
So being aware of, when you are signing the lease, what you are signing up for and the financial obligations that come with it.
So if we are having roommates, for example, what does our lease say, are we on the hook for the entire amount or are we only responsible for our share? Many parents, of course, purchase homes or condominiums, if they have multiple children, it sometimes makes sense to do that, so purchase a condominium or home that your child can stay in and rent out the other rooms.
Yet be very cautious about understanding with the obligations are.
if you got Hydro bills, telephone… Probably not land lines, I'm dating myself.
We want the students to understand that these are contracts withfinancial costs.
Depending on the type of home you get, there may be those additional costs.
Is it inclusive? Is parking included? Is there transit nearby they can help you cut downon some of the other costs that you might otherwise be incurring? So there's a lot of other factors that go in, depending on what type of housing unit your student finds themselves in.
>> A great start to the discussion and we will get your questions about personal finance for Nicole Ewing in just a moment.
And a reminder that you can get had with us at any time.
Just email moneytalklive@td.com or fill out the viewer response box under the video player on WebBroker.
Now here's an update on the top stories in the business world today and a look at how the markets are trading.
Netflix said it added nearly 6 million new streaming customers in the second quarter, nearly triple what Wall Street's estimates were. The streaming giant NOW boasts more than 230 million global customers, subscribers rather.
Profits for the quarter also topped forecasts, but quarterly revenue of $8.2 billion fell just shy of analyst predictions.
A weaker than expected outlook for revenue in the third quarter pressured shares lower in early trading. Meanwhile,tesla posted better-than-expectedsecond quarter earnings late Wednesday, while revenues rose to a record $24.9 billion. Tesla said adjusted earnings for the quarter were up 19.7% from the same period last year and topped Street forecasts.
However, adjusted automotive margins were down from last year following a series of price cuts and its biggest global markets.
And finally, Apple became the latest company to jump aboard the artificial intelligence trend.
The iPhone maker has begun preparing an AI chatbots to rival open AI's ChatGPT, Microsoft Bing and Google's bard.
According to reports, Apple built the AI chatbots service on proprietary models created by a framework called Ajax, which was first built last year and runs on Google cloud.
The move signals apple is taking recent advances in AI technology seriously and is considering integrating them into future products. And here's how the main benchmark index in Canada is trading.
currently, the TSX is still down modestly, nearly 57 points, to the tune of .3%.
Taking a look at the US S&P 500, it's also down modestly, just above nine points or 0.2%.
We are back with Nicole Ewing, taking your questions about personal finance.
We will start with the first one.
This one is on medical Corp.
shares. A former medical professional Corporation converted to a consulting Ontario Corporation on retirement has voting share, Dr., and nonvoting shares, spouse.
Can the nonvoting shares be paid a dividend or converted to preferred shares with rights to dividends?
Nicole, I hope you got all that because I didn't.
>> I have encountered this question before it. It's a very common question for medical professionals because medical professionals have restrictions when it comes to their Corporation.
Who can own shares and what type of shares they can hold. But once they are no longer practising medicine, it's no longer medical professional Corporation.
So it can be essentially a holding company or another type of company that you are operating through.
What matters is that when you created the company, you would've created different types of shares. You created chairs for yourself and for your spouse in this instance.
Those shares, we want to go back to the articles of incorporation and want to look at what those share attributes are, what they say. Are there dividend rights to them?
What those might be. And because they're all those restrictions when the company was first set up as a medical corporation, the share attributes might not have the options that you want them to have going forward.
So what we might be doing in an instance like this, if you are shares don't allow for the payment of dividends in this situation, we might need to perhaps issue new shares or convert our shares, trade them for a new kind with the share attributes that we want to have attached to it.
what we need to be very cautious about is transferring valuefor nothing. That is where the government and CRA is going to be very upset if we create this new class of shares and all of a sudden we are funneling out money on those shares that really should be properly owned by these ones over here. So just being cautious about what those attributes say so that we are not transferring value from doctor to spouse without being mindful of the tax consequences of that or doing appropriate steps to get that over tax-free.
So this is my very long way of saying you can have shares within your corporation that's continuing as an Ontario Corporation and we might have to issue new shares.
>> Thank you for clarifying that for me as well. You will move onto the next question on cottages.
Any general guidelinesfor cottage transfer planning?
>> I mean, we could talk for days.
Some families talk for years about these issues because transferring the family cottages a very emotional issue but it also comes with some very serious tax consequences depending on how things are set up.
So I would say that the beginning of this discussion, you want to, firstly, be mindful of what your cost base is, what did you pay for the cottage?
What additional costs can you add to that?
For example, if there have been construction at the property.
>> Would that include renovation?
>> Certain kinds.
There's a difference between if we are making a substantial change or just maintenanceand how the government treats that sort of thing differently.
So we want to have our cost base understood, with that is, and our fair market value to know what the tax consequences might be. And then I would say, first step is talking to your family and finding out if they even want the cottage. And I've spoken with more than one client where the parents are really struggling about how to transfer this on, they have three children and they want to be equal and fair and how do we do this, and we say, have you spoken to them?
Do they want to? It that can sometimes lead to different results.
So making sure that the people who want to take over the cottage understand what they are… What their options are and what the obligations will be going forward, and that they might be giving up some of the liquid estate that they would have otherwise been transferring.
Stop me if I go too far, but you want to really think about, are we transferring it during life? And if so, there's probably going to be a tax consequence for that, whether we transferred into a trust or we can lay out some of the terms.
Do you freeze the property and walk in the value entrance for the future growth to other family members?
Or we can think about leaving it in our will and all of the issues that come with that and how precise we need to be.
One of the other big, big issues is the tax bill.
And planning around have a tax bill is going to be paid so that we are not in a situation where we need to sell the cottage in order to pay the tax on the cottage. So we want to think about the different types of ways of funding that tax bill and there is insurance for that or self funding, different ways to think about how your way to achieve that and whether that next generation might be perhaps finding some of that as well.
It's a big, big conversation. The most important part is open communication about what it is you are trying to achieve, why do you want this cottage to be passed down, is it your wish or the wish of the individuals? And then try to do that in the most cost-effective way, tax effectively and family harmony maintaining way as possible.
>> As you said, lots to consider when it comes to transferring the cottage.
>> Very much.
>> We will move to the next viewer question. This is on old age security. I just listen to your show on buying or renting and she said that earning money in stocks would impact my old age security.
Really? Is that true? Or has she made a mistake?
The viewer is referencing an episode of MoneyTalk from June of this year that you were on, so I will pass it on to you.
>> Great. I always appreciate the opportunity to clarify and make sure that we understand what it is I'm talking about.
So yes, it can impact your OAS, depending on the type of income and investment you have.
so firstly, when we look at our old age security threshold, the government threshold at which any amount over that will have a clawback on your old age security, and the value that is being used to determine what your income is includes the gross dividend value that you included in your taxes. So just to back up a little bit, when we earn dividends, say I earn hundred dollars.
I received my hundred dollars. My report that all my taxes, I need to gross up that amount, and that's all part of theintegration of the tax system and to make sure that corporate pay taxes and individual paid taxes have come together for perfect integration so there is no impact to the type of business that you might be wanting to operate under.
Anyways!
That $100 is actually when you show up as $138 on my tax return.
And so if I'm thinking that I take X number of dollars out as dividends, and that's going to be at my income, 87,000 are just under his threshold now, so I put that down, 87,000 of dividend, for example, that is not the value that is going to be used for OAS purposes.
For old age security, they are going to do the 87,000×.38 or 1.38 in order to get that up and we are going to be then in a situation where we have a clawback of the old age security that we have received.
What do we do about it? Well, there are different types of investments. Of course, capital gains… As long as they are just accruing, there is going to be any income.
We can have our dividend producing stocks in our TFSA, so when we withdraw from our TFSA, that's not going to impact, it's not included in income for the purpose of old age security so there some strategies there, but yes, be mindful of your dividend paying investments in terms of your old age security and the threshold for the income that's in question.
> Great start to the discussion.
As always, make sure you do your own research before making any investment decisions.
and we will get back to your questions for Nicole Ewing on personal finance in just a moment.
And a reminder that you can get touched us at any time.
And a reminder that you can get in touch with us any time. Just email moneytalklive@td.com.
Now let's get to today's educational segment.
If you are looking to find out what sort of asset mix you have in your portfolio, WebBroker has tools which can help.
Joining us now with more is Nugwa Haruna, Senior client education instructor with TD Direct Investing.
Sonuga, for investors looking to determine what the breakdown of assets that they hold in the portfolio, is there a tool in WebBroker that can help?
> Yes.
There is a tool within WebBroker called the asset allocation tool that investors can use. The reason why investors may consider holding different asset classes, and when we say asset classes, we mean equities, fixed income, cash or cash equivalents or even things like real estate or options, and the reasons why investors may consider having an asset mix and their portfolio can be for diversification reasons.
That's because these asset classes tend to react to market conditions in different ways.
So for an investor who is looking to manage risk, they may consider holding a combination of these different asset classes. Let's happen to WebBroker and take a look at how investors can see what they are holding.
So once in WebBroker, you want to go under accounts and once under account details, you are going to click on asset allocation. Now, the account I am using is a demo account.
There are no assets in there. But as an investor, you would be able to see what the breakdown would be in your portfolio.
So you would see things like equities, Canadian, US, international equities.
You will also see things like fixing, as well as cash and cash and cash equivalents and other.
so for investors who want to explore more about what this looks like, I would encourage you to click on the little?
That's just on the right side of your screen. Once you do that, you will be presented with what an asset allocation would look like.
I will also break it down and give you a definition of each of these asset classes so you are more comfortable with what you're putting in your portfolio. So this is a way investors can do some sort of portfolio management and see exactly what they are holding in their accounts.
>> That's great perspective.
So if I'm interested in seeing the historical returns of a portfolio with a similar asset mix and how it has performed in the last few years?
>> Rate. So some investors may, after going through this, may realize maybe I am holding 70% stocks versus 30% fixed income. I never took the time to break that down to see what my potential returns could be.
Even though there is no tools or project, effectively project what your returns would be, there is a way you can see what people holding similar portfolios, how that would've performed in the last 15 years.
So you can see historical returns. Let's happen to WebBroker and I will show you where you can find this information.
In WebBroker, what you want to do is go to the goals tool.
Once you click on gold, you want to go ahead and start creating a goal.
The second step when you are creating a goal is being presented with the different asset mixes. I've started creating a goal and when I click continue, I'm on step two.
so at this step, you will see some of the most popular investor portfolios.
So conservative is more 7030, 70% fixed income and cash and 30% stocks.
Moderate is more 6040, 60% equities, 40% fixed income. But if you want to look at what your own portfolio, how it has… How it would've performed the last 15 years, once again, historical performance is not a projection of the future, you can actually create your own profile.
Some went click on create your profile here and this is where you get the opportunity to throw in what your asset makes it is. I'm just going to pull a few numbers.
I will say 30% Canadian equities, 30% US, I will make international equities 10% and let's say 10% here as well for our Canadian and 10% for global fixed income.
So after doing this,I will click on update historical returns. So once I do that, I would be able to see a portfolio that held 70% equities and 30% fixed income, in the last 15 years, the best year was, that portfolio would have been up almost 30% but also because you are dealing with equities which can be very volatile, the worst year would've been out 20%, and then the average return of this portfolio would've been around 6.
5%.
So this investor can make an informed decision. Maybe they want to reduce the equities position, let's make this tan, links make this 10, BBM going to increase my fixed income positions, make this 30.
After doing that, let's update this portfolio and once you do that, you will see that now this portfolio that is more heavily weighted in fixed income, you can see in the last 15 years that the best year was up around 12.5%, the worst year was down 7.5%.
Life reduce that volatility in my portfolio but it also means that because I'm taking less risk, I'm also potentially reducing my average return. These are things that investors can do within the portfolio to give them an idea of historical performanceof a portfolio similar to theirs and potentially let them know what they may be looking at if they keep holding this portfolio for the future.
>> Nugwa, great information as always.
Thank you.
>> It's always a pleasure being here.
> Our thanks to Nugwa Haruna, Senior client education instructor at TD Direct Investing. And make sure to check out the learning centre in WebBroker for more educational videos, live, interactive master classes and upcoming webinars.
Now before you get back to your questions about personal finance for Nicole Ewing, a reminder of how you can get in touch with us.
>> Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.
com or you can use the question box right below the screen here on WebBroker.
Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
>> Okay, we are back Nicole Ewing, taking your questions about personal finance.
This is on tax changes. Have there been any changes in tax law that I should be aware of?
>> Well.
Really… For the last 10 years or so, we have seen really significant changes in the tax rules in the planning that we need to do around that.
And most recently, we were, again, there were some proposed changes that will be coming through or may be coming through next year. I think the one, it's not really a change but it might just remind people that there was a recent court decision in terms of the information sharing between the CRA and the IRS. And Canadian organizations with the US government. And we have these rules for account forms that need to be completed and information shared and a couple of taxpayers brought to the court and said this is unconstitutional. You are sharing my information. That shouldn't be done.
Unfortunately, unfortunate for them, the court said, no.
We are going to continue sharing it. And they appealed and they appealed and the final result is, no, we are going to continue sharing it. So for taxpayers that have those US connections, you need to be doing that filing. We are sharing that information. Canada and the US to do share banking information.
This is why you need to fill out those forms. Every time you open an account, you are asked to rate your citizenship. That account sharing information will continue.
So from a tax perspective,it's interesting. There was a case many years ago, it's not new, but in terms of whether you can collect a debt, with the IRS can have Canada pay any refund owing to the individual over to them. And in that case, yes, the IRS could ask to do that.
A lot of changes. I would say hold tight, there is still some legislation being looked at, potentially redrafted. But certainly depending on what type of taxpayer you are and if you're a business owner, we've seen a ton of changes in the last few years and I expect we will see more.
>> Okay.
We are going to switch here's a little bit. We will talk about donations. Next question. I've read that there have been changes to the way charitable donations are taxed.
What's going on?
>> Well, this is one of those proposed changes that was in the budget and there is frankly been a lot of… The way that it is being communicated to the public is being misunderstood by some individuals in terms of how it's going to have an impact on them individually.
just sort of broadly speaking, the changes, I think this question is speaking to is changes to the alternative minimum tax calculation.
So you may have heard about this. This was the big one, the sleeper when the budget came out and then everybody started understanding what the impact is. When an individual earns tax preferred income, so think capital gains, and has with the government calls excessive use of credits or deductions to reduce the amount of tax owing, there is a separate population done called alternative minimum tax.
If that threshold is met, you will have to pay tax, the difference between what you otherwise would have actually owed and the resulting alternative minimum tax amount.
It is relatively low, 15% that tax would be to any amount over $40,000. That's the exemption amount. The change in that has increased that exemption amount to I think $73,000. and the calculation of what's included, that's was changed and that probably was going to impact charities in the situation.
so when we do that calculation, that base of what is included for alternative minimum tax, previously, you would have 80%of capital gains included, now is going to be 100% included.
And donation of publicly listed securities, which were not included at all before, are now being included at 30%.
And the tax credit, the AMT tax credit the you are able to use to reduce that AMT amount has also been reduced from 100% to 15% of certain of these deductions and credits.
So the calculation has changed and for very, very high income earners who have very significant reductions in their tax owing by the use of things like the lifetime capital gains exemption or charitable donation or these other sort of credits that can reduce it, that's something that they are going to be mindful of.
And there is a concern that some of these charities might not be receiving the donations that they otherwise would have because people are not getting the tax preferred outcome that they would've had previously. And so depending on who you are and what your income level is in the amount of gifts that you're making, it could impact you.
I will say that for contexts sake, the examples I see being used are an individual earns $2 million of capital gains in a year and makes the million dollar donation.
So that should give you a hint to the numbers we are talking about for the types of situations where these changes to the AMT might be impacting individuals in the sorts of situations. But generally speaking, when you're talking about charitable donations that most of us would be making… > Slightly lower then.
>> It certainly not at that threshold.
And so for most people, I would say this is not going to impact you directly. There is a lot of fear being generated around these issues and they are real. They are real.
We need to be aware of how alternative minimum tax calculations can really have the intended consequences, perhaps unintended consequences. Charities are rightfully concerned about the impact to them.
But for individuals making charitable donations, unless it's in that very significant range, you probably don't have much to worry about.
>> So I wouldn't have anything to worry about there.
We will move to the next question from our viewers. This is on portfolio moves.
If I'm making changes to my portfolio, what should I be keeping in mind from a personal finance perspective?
>> I like that question.
It's a great question because it puts the investment decisions that we are making, our portfolio decision, in the context of the big picture, the overall plan, hopefully, that we have for our assets.
So it always suggests, you are stepping back, looking at your overall goals, what is it you are trying to achieve, what assets you have, liabilities.
We pull that together to plan so you will have clarity on the environment you are operating within. When it comes to making those individual changes to your portfolio, there might be tax consequences to that.
And it does surprise me but it surprises taxpayers that they're going to be at tax consequences on the trades that are being made or the type of income that is being earned. So if you're moving, for example, from… Capital gain to a dividend paying stock, this is where you might have the impact on things like your old age security that you weren't anticipating.
See want to, again, step back and look at it from the big picture.
Whenever we are making changes, again, we want to be mindful of superficial loss rules. These of the rules of essentially say it if you are claiming a loss and have sold or reacquired within a certain period of time, 30 days before or after, think about the 60 day window, your loss is going to be denied. What many people don't think about in that situation is that it also applies to your spouse.
So if your spouse is buying or trading in their portfolio and you are over here doing similar things but not communicating with each other, you could inadvertently fall into the superficial loss rules which would deny any of your losses that you might be trying to harvest and get into more higher-paying, higher value stocks.
So you definitely want to be thinking about that in the full picture and then to the extent that you are making any of these changes and these are registered plans that allow you to have beneficiary designations, make sure that those are up to date and that you are being mindful of those as well.
Gosh, yeah, I really suggest making sure that you are looking at it holistically and that the individual investment decisions that you make, which I will leave to you to me, but they can have these other impact on your planning.
>> Okay.
We will get back to your questions for Nicole Ewing on personal finance in just a moment.
As always, make sure you do your own research before making any investment decisions.
and a reminder that you can get in touch with us anytime.
>> Do you have a question about investing or what's driving the markets?
Our guests are eager to hear what's on your mind, so send us your questions.
There are two ways you can get in touch with us.
You can send us an email anytime at moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. Just write in your question and hit send.
We'll see if one of our guests can get you the answer right here at MoneyTalk Live.
>> Time now for the update on the markets and we are having a look at TD's advanced dashboard, a platform designed for active traders available through TD Direct Investing. We are looking at the heat map function here which gives you a view of the market movers on the TSX 60 by price and volume. You can see that in the top right corner, there is weakness in Shopify which is down more than 3%.
Taking a look at some other names,ABX, Barrick Gold is also down a little over 1%.
Okay, let's take a look at the S&P 100.
And right in the middle, Tesla you can see is in the red, down more than 7%. Tesla just reported some mixed results on Wednesday.
We saw a drop in its operating margin, so it is down to the tune of just about 7%.
Also Netflix on the left-hand side is down as well, it reported some mixed results on Wednesday.
You can find more information on TD Advanced Dashboard by visiting TD.com/Advanced Dashboard.
We are back now Nicole Ewing from TD Wealth with the next question.
This is on estate freezing.
Can you please explain estate freezing?
Good question.
> Yes, I can ask Mark This is a term that is thrown around a lot for business owners or those of us that has significant assets that are expected to grow so you might be hearing this terminology.
So simply what you're doing and the reason it is called estate is because we are thinking about your final tax bill. We are freezing your estate at the value that it is at today.
so if we use, for example, say I have a business that is currently valued at $5 million and there is a very clear likelihood that is going to be going up in value in the next 20 years, but I don't need any more than $5 million. That's all I need and I have enough assets to last me for the rest my life so I don't need to be tapping into that. So to the extent that we have assets continuing… I'm continuing to hold them, continuing to gain value, that ultimately is going to be taxed on my death.
So what I say is, hold on, I'm going to freeze the value of my company today at that $5 million by taking preferred shares that are fixed at and valued at, redeemable at $5 million, meaning they can never go up.
You can't have dividend rights on it.
Don't fret.
The common shares, those that are going to gain value in the future, are going to be transferred either to another individual or, more typically, to a trust that that, in the future, upon my death, when I am deemed to have disposed of all of my assets, what I have disposed of is $5 million of preferred shares. Even if my company is worth $20 million, that 15 million is not going to be taxed in my hands or my estate, it's all going to be taxed in my children or beneficiaries hands unless or until they transfer that property.
The one thing to be mindful of in an estate freeze that is sometimes overlooked is that if you are using a trust to do that, because maybe you don't know who you want to give those shares to, be mindful that we have a 21 year rule. That every 21 years, the trust will be taxed on the value of any growth during that time.
So just be mindful, depending on age, sometimes these freezes are done too early and then you are in the position of, do we pay this tax that I wouldn't have had to payif I had kept the whole value in my hand? Or am I rolling those assets out of the trust and into the hands of beneficiaries may be before I intended to?
So essentially, yeah. That's what you're doing.
We are freezing the value of the asset at today's value and that the current owners value will never increase and that future value has been transferred to somebody else.
>> Great discussion. Thanks very much for joining us, Nicole.
>> My pleasure.
>> How are things to Nicole Ewing, Dir. of tax and estate planning at TD Wealth.
Make sure to always do your own research before making any investment or personal finance decisions. Will be back tomorrow with a look at the latest Canadian retail sales report and an update on how the markets are faringheading into the weekend. Be sure to tune in on Monday.
Damian Fernandes, portfolio manager at TD Asset Management will be our guest taking your questions about global stocks.
A reminder that you can get a head start.
Just email moneytalklive@td.
com.
That's all for our show today. Take care.
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